US Tax Returns - Significant Changes This Year

[Merican]

I'm just finishing up my US tax return. It took quite a long time to put together this year. Apparently, "Congress has passed the largest piece of tax reform legislation in more than three decades." I also had to report a few cryptocurrency transactions. I was unsure how these short term gains would be taxed, but luckily I will again pay zero tax to the US this year. For some taxpayers the process was probably simplified, such as US residents with only earned income. Form 1040 has gone from two full pages to two half pages, but there are new Schedules 1 - 6. In my case, I had to file additional forms compared to 2017. Personal and dependent exemptions have been abolished, but standard deductions have increased. Below are the forms I will file and the reasons why I need to file them:

1040
1040 Schedule 1 (Foreign Earned Income Exclusion / Capital Gains)
1040 Schedule 6 (Foreign Address)
1040 Schedule B (Foreign Bank Account / Bank Interest / Dividends)
1040 Schedule D (Capital Gains and Losses)
8949 (ETF sales [portfolio re-balancing] / cryptocurrency transactions)
2555-EZ (Foreign Earned Income Exclusion)
8965 (Health Coverage Exemptions)

How is everyone doing with their taxes this year? What forms will you file?

https://turbotax.intuit.com/tax-tips/ir ... /L96aFuPhc

[captainspoke]

I haven't even gotten close to starting my US taxes yet, tho I've seen that my 1099s are now online. I've used turbotax for a few years, but it's one of the more expensive packages and I have been thinking to try something else (perhaps using TT as a fallback). Tho given the tax law changes, maybe I should stick with it for at least another year?

My first step is always filing for extensions (forms 4868, and 7004), which gives you some extra months to finish--I hope nothing has changed there.

[TokyoWart]

I probably obsess about taxes too much so your question is giving an alcoholic a drink in my case. This year I’m filing separate returns for each of our children because we had to submit FBARs in their names for their Junior NISA accounts. They don’t owe any taxes (just a few hundred dollar equivalent in dividends) but that meant a Schedule 6, Schedule B, Form 1116, Form 8938 for each. Probably took no more than 30 minutes per return in TaxAct and much of that time was due to the slowness of the program. I have an Enrolled Agent do my taxes because there always seems to be a debate with the IRS on it and it’s easier for him to reach them. Don’t yet know what schedules that will include.

To Captainspoke, I thought we automatically got the extension. Do you still need that form? I always try to file early because I need info from the US return for my Japanese return and that deadline is so much earlier.

[captainspoke]

...
To Captainspoke, I thought we automatically got the extension. Do you still need that form? I always try to file early because I need info from the US return for my Japanese return and that deadline is so much earlier.

The automatic one is 60 days, to June 15th. The forms I mentioned (also 'automatically accepted') will give you until Sept. 15th.

Less so these days, but in the past April 15th was a little challenging for a couple reasons. School was starting back up, with those time demands. And tho not for a few years now, I used to get K-1s (for partnerships), which always came really late. (I avoid those things like the plague now.)

**

Also, TaxAct (premier) is one alternative to TT that I've considered. Would you give it a thumbs up?

[TokyoWart]

Thanks for the clarification on extensions (and no judgment intended on using them).

I’ve never used TurboTax so I don’t know how it compares to TaxAct. The good things about TaxAct for me are that it shows the refund/tax owed outcomes of each action as you input into the system. The disadvantages are that phone support is poor during our mornings in Japan (probably peak evening consultation times in the US), they can answer questions about how to use the software but not about IRS regulations, and extras like “audit support” have no meaning at all. The IRS disagreed with a TaxAct calculation for me a few years ago for about $20K of extra taxes (without explanation) TaxAct was of no help in justifying their position so I had to take the problem to an Enrolled Agent who agreed with TaxAct but the debate is still ongoing 3 years later. For simple returns like my kids’ it seems to work okay and you don’t pay until you file.

[Utachiyo]

Since I become a Japanese citizen last year and gave up my US citizenship, my tax return was WAY more complicated than usual! I had to send forms to two different addresses. The instructions were ZERO help - had to rely on whatever I could find posted online from others who went through the process. I hope I did everything OK.

[StockBeard]

For those concerned about the cost of Turbotax, this year I learned that my company is paying another company about $1000 a year to handle my JP/US taxes. Their tools are not anywhere close to the quality of what Turbotax provides in my experience. I think it puts things in perspective.

Since I become a Japanese citizen last year and gave up my US citizenship, my tax return was WAY more complicated than usual! I had to send forms to two different addresses. The instructions were ZERO help - had to rely on whatever I could find posted online from others who went through the process. I hope I did everything OK.

As someone who is neither American nor Japanese but has to file tax returns in both those countries, I can only empathize . Can you clarify why you had to send forms to two addresses, though?

[Utachiyo]

As someone who is neither American nor Japanese but has to file tax returns in both those countries, I can only empathize . Can you clarify why you had to send forms to two addresses, though?

Usually, I send everything to one address, but the one form that's an Expatriation Statement is supposed to be sent to a different place. I guess that's the office that deals with us "traitors". So I had to send everything to the usual address, then send copies of certain forms to the different address.

I heard the IRS is super busy and backed-up because of the shutdown, so maybe they'll be willing to overlook any minor mistakes on my forms! And I make nowhere near the amount of money required to owe anything anyway.

[Merican]

Wow, sounds like there have been several tax headaches and some real nightmares. I really hope tax filing goes smoothly this year for everyone.

Form 1116, Form 8938 for each

TokyoWart you might be able to save more time with your kids' tax returns in the future. The standard deduction ($12000) would remove the need to file form 1116 for a small amount of dividends. As for form 8938, the instructions state that unmarried taxpayers "satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year." So unless they've got some huge bank account balances or something, they wouldn't have to file that form.

https://www.irs.gov/pub/irs-pdf/i8938.pdf

[TokyoWart]

TokyoWart you might be able to save more time with your kids' tax returns in the future.

Thank you Merican for your help.

The standard deduction ($12000) would remove the need to file form 1116 for a small amount of dividends.

One of my children is not a dependent and has the standard deduction while the two others can be claimed as dependents so only have the lower $1050 deduction (their dividends are lower than this limit, too). I did not know that Form 1116 was not required, but if we didn't file it we would not be able to have a carryover for the dividend taxes paid in Japan, correct? Still probably makes sense not to waste time on the Form 1116, so your point is well taken.

As for form 8938, the instructions state that unmarried taxpayers "satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year." So unless they've got some huge bank account balances or something, they wouldn't have to file that form.

I did not know this and they are well below that limit. My software (TaxAct) prompted for the form. The only reason I'm filing a 1040 in their name is that having filed FBAR's and their foreign dividends need to appear on some 1040 form. I would have thought they (the IRS? the Treasury department FBAR folks?) wouldn't know we'd met the requirement without that 8938, but I guess you're saying I could get by next year with just the 1040, Schedule 6 and Schedule B. Is that correct?